Preserving the best of family values in an expanding business

What does corporatisation mean? As applied to small and medium-sized enterprises (SMEs) that are owned and managed by one or more family members, it includes the development of professional management and a strict separation between the finances of the company and those of the owners.

Typically, the family business is started by an inspired individual who performs two or three key management functions. The business effectively relies on one or a few key persons, without whom it would not be able to sustain itself.

Osprey Partners have considerable experience advising business owners who are going through the "growth pains" of taking their companies to the "next level" of development; this can cover such issues as an objective review of the company's business strategy, formalisation of its strategic planning processes (including financial strategy), defining the distinction between shareholder and executive functions in the company, and advising board members and senior managers on a range of corporate finance subjects.

Some common “triggers” for this process of corporatisation are:

	The owner wants to reduce his involvement in the business, but there are no family members to take over;
	A co-investor enters the firm;
	The company plans to list its shares on a stock exchange;
	The owner/manager dies and the heirs (as the new owners) do not want to work in the business.

There is nothing inherently wrong with a family business as a business model! Clients approach us concerned that their company is at a competitive disadvantage in today’s business environment. In fact, the reverse can be true, as the presence of family values can be a source of unique strength. Among large corporations, Mars and Ford remain family owned. According to Professor Ludo van der Heyden (INSEAD), more than half of the top 250 firms listed on the Paris and Frankfurt stock exchanges (in 1998) were so-called “patrimonial” firms.